The compass can't display true north unless you give it permission to access your location. Check Privacy > Location Services > Compass on your Watch settings.
I have tried using the warranty on my AW4 before and they need to have the watch for a week.
I cannot go to work without my watch. I have other watches but they don't have the daily 12 silent alarms I use.
I never have used compass since the 1st week of buying the watch so I don't miss it.
When I get AW6, I will be able to send it away for a week in October.
I know it's a few years late, but I was having issues with this as well. I found this article that specified settings on the iPhone that needed to be turned on. They were disabled on my phone, so I enabled them. It took a second, but the compass app starting working on my watch.